The seeming complexity to some regarding the new homebuyer tax credit leaves potential buyers with questions. Here are a few recent questions and answers to some that I have encountered recently.
- How does an existing or past homeowner qualify for the $6,500 credit?
The new law states that buyers must have lived in their homes for at least five out of the last eight years. The home purchased must become their new primary residence, but buyers don’t have to sell their previous home. The previous home or residence can become a rental or a second home while the homebuyer still claims the credit.
- Does the new purchase have to be more expensive than the one the buyer currently owns?
No. The only caveat is that if the property sells for more than $800,000, the purchase doesn’t qualify for the tax credit.
- Can buyers who are building a new home claim the credit?
Yes, just as long as a contract for purchase and sale must be in place by April 30, 2010, and the buyer must have both Certificate of Occupancy and have closed on permanent financing by July 1, 2010.
- Can buyers claim the credit if they purchase a home from a relative?
No. This is one touchy area that Congress wanted to stay far away from in this legislation as it prohibits taxpayers from claiming the credit if the sale is between “related parties,” which include parents, grandparents, children, or grandchildren. This would also apply to any material relationship that might be deemed a related party
